Property claims will face a perfect storm in 2023

A combination of extreme weather conditions and economic pressure is creating the conditions for a spate of subsidence claims.

The effects of climate change on the UK property market will be increasingly seen in the coming year. The sustained period of record temperatures in 2022, combined with a predicted wet end to the winter – as well as trees becoming being less secure in the ground as a result of this year’s heat and high-wind storms – is creating the potential for a greater prevalence of ground movement such as subsidence, as well as sink holes or landslips.

Meanwhile, economic and inflationary pressures have led to local authority budgets being cut to the bone. Mitigation measures will be impacted as councils and homeowners will not have the funds to undertake necessary tree maintenance and removal. Opportunities for felling/pollarding will be missed because the nesting season starts again before the new financial year budget is in place, raising even higher the probability of a greater number of subsidence events and more properties needing to be underpinned. This will introduce capacity issues for the market as there are not enough subsidence crews to investigate, leading to longer delays in handling claims.

Local authorities have seen in-house employees and departments including geotechnical and arboricultural wiped out, while there are insufficient funds to pay contractors to oversee critical projects such as root barrier schemes. Ironically, local authority defendants will have to use those same geotechnical experts who they recently employed as third-party agents, retaining them direct for advice and site investigations. This will increase defence costs.

As a result, local authorities are suggesting alternatives by way of cash settlements to claimants instead, so they undertake the work. This will in turn lead to potentially more costs if claimants are not amenable and we expect that injunctive relief principles are more likely to be tested at court.

Given these developments are taking place against a backdrop of a dearth of skilled trades due to the dual impact of Brexit and COVID, and unprecedented levels of inflation as the cost of materials and labour spiral, insurers and property owners alike should brace themselves for a challenging year ahead.

View all our Insurance 2023 Predictions here